International balance of trade

[bailouts4ever]

Let me throw in one more angle to this.

So surplus countries keep buying currency reserves (piles of useless paper) or resources (piles of maybe usefull ores, earth, metals). The purpose of all that is building a war chest and getting prepared for an uncertain future. Yet, there is one thing missed in your thoughts - or at least I did not read while skimming over earlier entries:

KNOW-HOW!

State funds or sovereign wealth funds keep acquiring know-how. It seems that there are more and more surplus is being diverted into these funds. While initially the funds of course are stacked up with useless currency or SDRs their purpose is to invest into usefull investments. These "investments" can be perceived in buying extra know-how.

Classic surpluse nations (Kuwait, China, Lybia, Qatar, Norway) have all been building funds and same have landed major deals with them.

As now the EFSF is crawling around in Asia begging for investment for the new "insurance solution" we see what the Chinese want first - know-how.

So in a strange way we can say that knowledge is also a mean to create a certain balance.

What puzzles me though is how carelessly national assets (resources including know-how) are being traded. Up until know governments were often too happy to find an investor not considering that once know-how or resources are gone real wealth is gone.

Consider the "dutch disease" (funny being surrounded by dutch, talking about the dutch disease... ) as an interesting point here.

[Indiana Jones]

Let me throw in one more angle to this.

So surplus countries keep buying currency reserves (piles of useless paper) or resources (piles of maybe usefull ores, earth, metals). The purpose of all that is building a war chest and getting prepared for an uncertain future. Yet, there is one thing missed in your thoughts - or at least I did not read while skimming over earlier entries:

KNOW-HOW!

State funds or sovereign wealth funds keep acquiring know-how. It seems that there are more and more surplus is being diverted into these funds. While initially the funds of course are stacked up with useless currency or SDRs their purpose is to invest into usefull investments. These "investments" can be perceived in buying extra know-how.

Classic surpluse nations (Kuwait, China, Lybia, Qatar, Norway) have all been building funds and same have landed major deals with them.

As now the EFSF is crawling around in Asia begging for investment for the new "insurance solution" we see what the Chinese want first - know-how.

So in a strange way we can say that knowledge is also a mean to create a certain balance.

What puzzles me though is how carelessly national assets (resources including know-how) are being traded. Up until know governments were often too happy to find an investor not considering that once know-how or resources are gone real wealth is gone.

Consider the "dutch disease" (funny being surrounded by dutch, talking about the dutch disease... ) as an interesting point here.

Another Dutch thing that western governments are acquainted with: that dutch boy with his finger in the dike .......it all started with the first Central Bank in the World ...the Dutch "Wisselbank' and the first international company in the world ... the "Vereenigde Oostindische Companie" ....

You can blame us for everything, but you can't blame us for being traders.......

[Blondie]

there will NEVER be a perfect system because perfect balance will destroy evolution.

The quest for balance is the driver of evolution, but it does not follow that this can never or will never be attained... when balance is achieved there is simply a change of scale. Freegold is the self-awareness of the human super-organism. It really is a phase transition. The subjective yields to the objective, and the scale is changed.

I model my thinking on the systems I observe operating naturally all around us, from fractal examples if you like, where the only real difference is one of scale. These are quite simple systems, rendered complex only by the continual reiteration of the simple.

You and Paul appear to me to be basing your model on the perspective of a man who built a complex virtual currency to predict the movements of value in an inherently unstable artificial value exchange system (free-floating fiat currencies with no reference point). I take my hat off to him; a marvelously clever fellow. But he is still working within the confines of an artificial system all the same.

If it ain't broke, don't fix it.
Nature does not appear to be broken to me.

******

That'll be a huge profit for central banks won't it ?

No, it won't.
What about all the lost value from their forex reserves? By your logic this would be a huge loss?
Did these CBs not exchange value for their gold reserves in the first instance?
As you have stated yourself several times, gold is the hedge, recapitalizing its holder in the event of massive currency devaluation.
Are CBs not allowed to hedge?

Guess they won't sell it all at once because that'll ruin the pricequote, maybe they will sell it bit by bit.

They won't sell it all at once because it is their savings, and this is not the purpose of savings, to be spent arbitrarily all at once. Is that how you treat your savings?

I think they will eventually sell some...but I think it will be to keep the flow going.

Yes, as part of balancing their international balance of payments, probably strengthening their own currency by purchasing it with some of their gold reserve.
But since it is predominantly the citizens who produce and consume value, it is their gold that will predominantly flow to balance their efforts (or lack thereof).

Trust in money !

Holding Gold in Central Bank vaults today has a purpose like I stated before:
I guess because government want us to believe that money is a store of value they treasure gold in their Central Bank vaults, or they want us to believe that money is a safe heaven. But as long as government manages Gold it is a government tool and wil NOT be free.

Please supply your definition of "money", as your statements involving this term are meaningless to me without knowing what you mean by "money". I prefer to use the terms currency (medium of exchange); store of value; and unit of account. "Money" has too many different meanings to too many different people to give sufficient clarity to a serious discussion, IMHO. Please define it exactly, or use the precise term for whichever monetary function you are meaning. I have encountered this problem many times before (like here) and it is clear that without precise agreed definitions proper dialogue is impossible.

Government actually wants to get rid of the gold issue because they want you to trust them and not the gold.
ONLY when you break the bond between gold and government there will be a really free goldprice.

If this is the case, then governments do not appear to be succeeding, do they? Eventually the bond will break, this is the direction we are heading with trust in government diminishing and in gold growing.

in a strange way we can say that knowledge is also a mean to create a certain balance.

Knowledge is of the highest value, as it is the means with which to create value is it not?
Of knowledge, objective knowledge of oneself is far and away the most valuable variety.

[Paul]

Imbalance is human nature and everything that surrounds us. Therefore there will NEVER be a perfect system because perfect balance will destroy evolution. Maybe hard to understand but TRUE.

Yep,

I am not saying there will be perfect balance, on the contrary, as you state correctly it is imbalance that surrounds us,
If human kind wants to be around a few million years, like dinousaur did, it will find best system to fascilitate this one way or the other ...

With the rest of your post I agree

[Indiana Jones]

there will NEVER be a perfect system because perfect balance will destroy evolution.

The quest for balance is the driver of evolution, but it does not follow that this can never or will never be attained... when balance is achieved there is simply a change of scale. Freegold is the self-awareness of the human super-organism. It really is a phase transition. The subjective yields to the objective, and the scale is changed.

I model my thinking on the systems I observe operating naturally all around us, from fractal examples if you like, where the only real difference is one of scale. These are quite simple systems, rendered complex only by the continual reiteration of the simple.

You and Paul appear to me to be basing your model on the perspective of a man who built a complex virtual currency to predict the movements of value in an inherently unstable artificial value exchange system (free-floating fiat currencies with no reference point). I take my hat off to him; a marvelously clever fellow. But he is still working within the confines of an artificial system all the same.

If it ain't broke, don't fix it.
Nature does not appear to be broken to me.

Sometimes I’m like fooling around a little bit. It really is NOT my true nature but I hate to not understand something that really motivates me. I understand the freegold intentions but NOBODY can explain the freegold blueprint. Maybe this is not the appropriate thread for this issue so if you feel the need, you can move this discussion to another thread.

I cannot speak for Paul but for myself only. Here is the problem.

Since the beginning of 2010 in got in touch with the Freegold concept and read Another/s posts on USA Gold and later on Foa/s Goldtrail. Because it is a really beautiful concept just like the Bible I started to believe in it. Being a critical examiner I also started looking for the Freegold blueprint but there didn’t seem to be any. I read about Oil for partly Dollar and partly Gold and this seemed logical to me because the Dollar devalued couple of times in the past decades and the physical link between the Dollar en Gold was cut by Nixon (but NOT it's true link). The Arabs were simply asking for some Gold as a hedge against a devaluing dollar purchasing power. Later on the Arabs agreed with military protection instead of Gold and this also seems logical to me. Because the Euro was a brand new currency the Arabs asked for some Gold too and this also makes sense. Foa writes about Arabs selling some of their acquired Gold to exchange this into other stores of wealth and even this seems logical to me but this still doesn’t advocate for Freegold.

Reading Duisenberg/s Aachen speech I noticed the three theoretical functions of money MoE, UoA and SoV but the main currency issues are, as he quotes, TRUST and ACCEPTANCE by a COMMUNITY. Anyhow, there are different conceptions about this three functions of money but they actually don’t add to the real conflict.

The Euro severed its bond with Gold and therefore the ECB can value the gold holdings marked to market, unlike the Dollar. I’m O.K. with that and noticed that other countries are following the same strategy but this still doesn’t advocate for a Freegold system like Another favors. Duisenberg also stated that the Euro severed its link to the nation state but in my opinion that is not correct! The Dollar severed its link to the nation state because the US treasury ONLY can issue Treasury Bonds (the dollar simply is a TB derivative) and the individual states can’t because they can ONLY issue State Bonds and Municipal Bonds. Because Greece and Athens CAN issue Eurobonds it seems like the Drachme STILL exists in the background and the Euro practically has NOT severed its link to the nation state but only in theory.

According to the Freegold theory physical Gold has to price currencies. That means that TRUST and ACCEPTANCE in currencies and GOLD are a MUST in a Freegold system. But how can there be Trust if every single country has to assume that their neighbors are telling the truth about their gold holdings ? We assume that some Dutch Gold is really there in Amsterdam but some of it has a sticker ECB gold (BIS report). The rest of the Dutch Gold is stored in the BoE vaults, some of it is stored in Fort Knox and maybe some of it is stored somewhere else in WallStreet. The same problem arises for other European countries. So how about Trust ?
In what market place physical Gold trades and who will supervice hounest trades, certainly NOT the American paper Comex or the English paper LBMA. So what about Acceptance ?

The same goes for government austerity. Governments are time and again forced to control their budgets but they never managed to do so according to history. That same governments control their somehow unidentified Gold stocks in a freegold system. So how can a Gold system ever be free when government still is involved ?

Last but not least we probably have an international trade currency problem. Because that is a problem within itself I cannot mix it up in above thoughts, so I'll let it be for now.

fofoa is really an expert in interpreting the freegold concept quoting today/s events and I respect the man ! However I’m still missing the blueprint and his Goldtrail links don’t always match reality.
Over and over again I kept asking questions about the blueprint and the TRUST issue on another freegold forum but the only repetitive answer was, you don’t understand Freegold, you’re looking at the wrong direction, you’re looking too much into details and so on and so forth. Like the construction blue print of a building is an unimportant detail, mmmmm.

For over nearly two years it felt like questioning the Amish about their interpretation of the Bible and the answer was: you just have to believe in it because in our view it really matches (our) reality, we know HIS intentions, start reading the Bible all over again and interpret the Bible like we do or get the hell out of here because you don’t want to understand.
Really astonishing because even outsiders could somehow predict the 1944 Bretton Woods blueprint and even outsiders can analyse what went wrong in 1971 when the dollar SEEMINGLY severed its link to gold.



I’m still open for Freegold and I’m still waiting for someone showing me a practical blueprint. Until than Freegold is nothing more than a beautiful concept to me.

grtz. Indy

[Rasta]

@Indy

Could it be .......... that individuals will be bidding on "private gold" and not for the "public gold/central bank backed gold"? Then it doesn't matter how much gold the central bank actually has. That is the confidence part, in the fiat currency.

If a currency is distrusted, then measured in gold, the amounts supposedly sitting in the central bank could be exchanged for fiat on the cheap. If the central bank doesn't want to do that, then undervaluation of the currency for good reason.

If a currency is overvalued, then the central bank might accumulate gold on the cheap.

[Indiana Jones]

@Indy

Could it be .......... that individuals will be bidding on "private gold" and not for the "public gold/central bank backed gold"? Then it doesn't matter how much gold the central bank actually has. That is the confidence part, in the fiat currency.

If a currency is distrusted, then measured in gold, the amounts supposedly sitting in the central bank could be exchanged for fiat on the cheap. If the central bank doesn't want to do that, then undervaluation of the currency for good reason.

If a currency is overvalued, then the central bank might accumulate gold on the cheap.

Actually it isn't fiat we are talking about -pm-

They are bidding for ETF/s, Futures, Trackers etcetera. Only a very small group of people is bidding for the real stuf. But Gold isn't the only thing people are bidding for there's much more.

[Paul]

But Gold isn't the only thing people are bidding for

very true
and that makes ALL the difference.

[Blondie]

Indy, thanks for the post in english. I attempted to follow the dutch threads, but once translated they are barely/not understandable, so I have given up.

Thanks also for the concise stating of your position. As in all other spheres, in order to have an objective exchange (in this case of views), we first must establish a reference point for the sake of relativity. Your post does this.

Because I like to eliminate unknowns as much as possible, I would like to firstly clarify some of the things you have said:

Because it is a really beautiful concept just like the Bible I started to believe in it. Being a critical examiner I also started looking for the Freegold blueprint but there didn’t seem to be any.

Are these two statements not contradictory?
Believing something because it is a really beautiful concept seems diametrically opposed to be a critical examiner.
I’ll return to the blueprint issue in due course.

I read about Oil for partly Dollar and partly Gold and this seemed logical to me because the Dollar devalued couple of times in the past decades and the physical link between the Dollar en Gold was cut by Nixon (but NOT it's true link). The Arabs were simply asking for some Gold as a hedge against a devaluing dollar purchasing power. Later on the Arabs agreed with military protection instead of Gold and this also seems logical to me.

“Oil for partly Dollar and partly Gold” seems logical to me too, but not for the reason you state... what and when do you mean when you say “the Dollar devalued couple of times in the past decades”?
Also, what do you mean with regard to the “Nixon Chop” when you say “but NOT it's true link”?

While I agree that this is technically correct, I disagree that Oil seeks gold as a hedge against a devaluing dollar because this is too narrow a view of the situation.
This goes back to the reason “Oil for partly Dollar and partly Gold“ seems logical to me: Oil are happy with dollars (or whichever is the currency de jure) for their day to day flow of value (AKA their income and expenses), capital expenditure and short term investments, speculations and general consumption. But for that part of their value which they want to store (AKA their savings/reserves) they want gold. The reason they want gold is not as a hedge against a devaluing dollar in particular, but against devaluing currencies in general. But to call gold a hedge against devaluing currencies, while technically correct, is to view it from the wrong perspective. This is to imagine Oil thinks like you, but they don’t. The notion of storing value in currency seems viable to you, but for the problem of devaluation, so you want to hedge. Oil thinks your perspective naive. They have never even considered storing value in currency; the very idea, to Oil (and others of the Old World perspective), is absurd. They have always (millennia) used gold for storing value. You suggest they should use gold as a hedge against value lost in devaluing currencies? The idea of storing value in currency was always ridiculous. Old World perspective laughs at such “western thinking”.

So I say you are correct in this “gold as hedge” perspective, but only on your own terms.

Because the Euro was a brand new currency the Arabs asked for some Gold too and this also makes sense. Foa writes about Arabs selling some of their acquired Gold to exchange this into other stores of wealth and even this seems logical to me but this still doesn’t advocate for Freegold.

Neither of these sentences are making sense to me; can you expand them?

TRUST and ACCEPTANCE by a COMMUNITY

Critical indeed. We will come back to these later, for sure.

The Euro severed its bond with Gold and therefore the ECB can value the gold holdings marked to market, unlike the Dollar.

Yes euro is not like the dollar, but this is not because “ECB can value the gold holdings MTM“, but because ECB is allowing gold to value the euro MTM. Big difference, really big. Fundamental. You are viewing this from the western trader perspective, not Old World perspective. Western trader perspective is about to go down the drain along with the system that supports it, the $IMFS.

The Dollar severed its link to the nation state because the US treasury ONLY can issue Treasury Bonds (the dollar simply is a TB derivative) and the individual states can’t because they can ONLY issue State Bonds and Municipal Bonds. Because Greece and Athens CAN issue Eurobonds it seems like the Drachme STILL exists in the background and the Euro practically has NOT severed its link to the nation state but only in theory.

Dollar has not severed link to nation state: USA is a nation. TBs are issued by US Treasury. Pure debt.
Is the euro a Eurobond derivative? I say no. The euro is a medium of exchange only, and its value is a derivative of the amount of gold it can purchase. This amount is free to float and is publicly market-set information available 24/7.
Bondholders should wakeup and demand bonds denominated in gold! What if the market devalues the euro in gold? What if the market devalues dollar in gold???

According to the Freegold theory physical Gold has to price currencies. That means that TRUST and ACCEPTANCE in currencies and GOLD are a MUST in a Freegold system. But how can there be Trust if every single country has to assume that their neighbors are telling the truth about their gold holdings ?

State gold holdings have nothing to do with the value of a currency in Freegold.

Any currency is valued only by how much gold it is exchangeable for. CB gold reserves come into play only when a CB buys physical to weaken their currency, or sells gold in order to strengthen it. In both cases the size of the gold reserves (if any) not involved in the transaction are completely irrelevant.

The important thing in any monetary system is neither currency nor gold, but value. Any monetary system exists only to enable the equitable flow of value between the system’s users. Correctly used, currency and gold are but tools to assist users in objectifying and regulating this flow so as to ensure exchanges of value made inside this system are mutually beneficial.

In what market place physical Gold trades and who will supervice hounest trades

This requires a market maker/s to provide physical exchange facilities. As with any similar requirement for such services, the market always supplies facilities spontaneously where there is a commission in the offing doesn’t it? Supply and demand. An exchange not acting in accord with the needs of its customers would be shunned for one that is. Supply and demand.

Governments are time and again forced to control their budgets but they never managed to do so according to history. That same governments control their somehow unidentified Gold stocks in a freegold system. So how can a Gold system ever be free when government still is involved ?

Governments cede control to the market under Freegold, and the market rewards or punishes via the movement of gold and thus the movement of value into and out of a currency. For example, as the exchange rate of your currency drops in gold (due to your zone’s net consumption/BOP deficits) so it drops in buying power, meaning less consumption is possible in your zone. So your production becomes cheaper to those in other zones, slowly increasing your exports while diminishing your imports and moving your zone from being a net consumer to a net producer, at which time your zone starts to experience an inflow of gold as your strengthening currency has value removed from it and stored in gold by savers.

"But governments won't want to cede control!"... will they have a choice? The current system is at its end, and there is nothing that can be done to save it. Govt control and power stems from this system and the "easy money" it supplies to buy votes. The critical point is that you can legislate what people must use as a medium of exchange, but you cannot legislate what they use as a store of value. If the system becomes free somewhere (from such control) the currency used in that zone where no coercion is used will become more valuable everywhere than those that use coercion to find usage demand.

Govt cannot impede the flow of value... it will simply flow through another instrument that govt do not control. The only way control is maintained even now is through conditioning... look at where gold flows today: into India, China and the East, into the hands of POOR PEOPLE who see the flow of value with Old World perspective!
Govt can only impede your judgement with their "Credibility Inflation"!!!

Last but not least we probably have an international trade currency problem.

No problem. All traders trade in whichever currency/s are most convenient as objective relative valuation has been supplied in real time to all market participants via the gold/currency exchange rate. Finding the value of one currency to another involves only simple triangulation with the gold price in each.

Any currency is worth only as much gold as the market is willing to exchange for it. TRUST and ACCEPTANCE by a COMMUNITY of the currency they use stems directly from the objective valuation gold gives that currency. Gold becomes the reference point, supplying relativity, and from this grows trust and so into acceptance, not from threat of force (legislation/fiat) but free choice.

fofoa is really an expert in interpreting the freegold concept quoting today/s events and I respect the man ! However I’m still missing the blueprint

The “blueprint” is quite clear to me, and has been communicated very precisely (if very voluminously) by FOFOA via his blog. I suggest the problem is exactly as Another stated right from the start: the western trader mindset. Your post has exhibited it quite clearly. The Old World perspective is the one from which the “blueprint” is understandable. The construction blue print of a building is better understood by the builder than the building’s occupants.

[Paul]

Last but not least we probably have an international trade currency problem.

No problem. All traders trade in whichever currency/s are most convenient as objective relative valuation has been supplied in real time to all market participants via the gold/currency exchange rate. Finding the value of one currency to another involves only simple triangulation with the gold price in each.

Any currency is worth only as much gold as the market is willing to exchange for it. TRUST and ACCEPTANCE by a COMMUNITY of the currency they use stems directly from the objective valuation gold gives that currency. Gold becomes the reference point, supplying relativity, and from this grows trust and so into acceptance, not from threat of force (legislation/fiat) but free choice.

I suggest the problem is exactly as Another stated right from the start: the western trader mindset.

Thank you for response blondie,
I would suggest the mindset is not western at all, it is the trader mindset in general.
We disagree about this perspective.

To use gold as a reference point for trade suggests the value of the gold is equal in time and in place.
it is not. nothing ever is. you just can't fix value to something tangible. value is relative and in the eye of the beholder.
When no collective independent one is fascilitated trade will find and use the most competitve currency as a reference point. it is much more practical. could just as well be yuan. nothing western here ...

a bit of gold MTM on cb balance just makes for good windowdressing to gain confidence in this currency. This confidence can still very easy be lost.
just look at EUR today. Is it stable ? no it isn't. why not ? it's debtstructure is flawed. Gold MTM does nothing to prevent this crazy outflow of value. It is breaking apart from periphery until core confidence collapses.

This is going to be a very interesting and scary month.